A new generation of baby boomers faces retirement-and new uncertainties.

Turning 65, collecting a gold watch, and hitting the sun-splashed golf links may be the classic form of retirement.
Way back a generation ago your lucky parents often just stopped work and relaxed the rest of their lives. That was a different time. But this is now and a new generation of baby boomers-about 78 million strong-is barreling toward retirement. No shuffleboard for this generation. And less talk of golf handicaps. For many today, retirement will be different-with new implications for the financial services industry. A year ago, for example, a survey by The Hartford Financial Services Group of pre-retirees and retirees who have a professional advisor found a disconnect between the services advisors are providing and those clients are desiring.
Clients said the top three services they received from their advisors were: (1) selecting good investments; (2) building a balanced portfolio, and (3) providing advice on not outliving assets. When clients were asked what services they desired from their financial advisors, they gave the same answers in the opposite order of preference.
At a panel discussion on retirement issues, given recently at the New York Stock Exchange, Ramani Ayer, chairman and CEO of The Hartford, in his opening and closing remarks, said the challenges today are complex. As they enter retirement, boomers face uncertainties about Social Security, defined benefit pension systems and retiree medical insurance, he said. More are "sandwiched": They're juggling the demands of raising children and providing their college education, and helping aging parents by providing physical, emotional and, in many cases, financial support.
Joseph F. Coughlin, founding director of the AgeLab at the Massachusetts Institute of Technology, said aging essentially is about longevity, and the baby boom generation is the first one to fully empower women, since they are living longer than men. "Women are actually making more decisions around health, wealth, family and caregiving than any time before in history," Coughlin said. "They provide the majority of care both to their children, husbands, in-laws and their parents. And, frankly, they are going to be the ones that have to live long enough to put up with the decisions made as a group or as a family."
Asked in a Q&A about the continuation of health-care benefits now that companies are starting to drop such benefits, along with defined benefit pensions, Coughlin said it was not so much companies backing out as shifting more of the risk to employees. "What you're seeing now is a profound personal responsibility shift. They're saying if you have high blood pressure or diabetes, put down your Danish and go for a walk. And some of the (company's) financing may come along."
Maureen Mohyde, director of corporate gerontology in The Hartford Financial Services Group, said although boomers have had considerable education many lack financial literacy, and therefore will be looking to advisors they trust for financial advice rather than seeking information on their own. That's mostly a result of not having enough time rather than lack of it, and advisors can fill the void. "This is a problem about convenience and people not having enough time," Mohyde said.
Historically, retirement has meant the end of work. By contrast, today about 25% of "retirees" work, Mohyde said. Meanwhile, surveys of boomers project that 80% will continue to work, she noted. The truth, however, probably lies somewhere between those numbers.
John Diehl, a vice president and CFP with The Hartford, said financial advisors need to understand small business planning, retirement income distribution, wealth transfer and other strategies related to retirement. While education is a critical piece in helping boomers meet new retirement challenges, the marketplace must come up with innovative new income solutions, products and applications, suggested Diehl, newly named head of the Retirement Solutions Group.
The concept of asset allocation in the accumulation years will yield to the concept of product allocation in the retirement income years, Diehl indicated. As examples of product innovations, he noted the growing popularity of mutual fund fixed-income options, such as TIPS (Treasury inflation protected securities) and floating rate, or bank loan funds, a noted transition from the growth accumulation phase. The Hartford's new product mix includes The Hartford Income Security annuity, a fixed payment annuity that guarantees lifetime income starting at a future point and continuing for the rest of the investor's life, no matter the length of that period. With this product, investors can manage their nest egg to a specific time horizon and gain the leverage that a deferred payout can provide.  
Typically when it comes time to cash out of 401(k) plans, investors opt for lump-sum payouts. Such plans are fast supplanting defined benefit plans in the workplace. Diehl predicted that more options would likely be added to 401(k) and other employer-sponsored defined contribution plans, which would allow investors to plan for a guaranteed level of income in their retirement years.  
Advisors are going to have to not focus just on asset accumulation for clients but also on expense management to protect clients from outliving their assets. "It's a new way of planning for clients," he said. "You can't put together a portfolio that returns them 12% a year and have them spending 20% a year wondering where their returns are."
Giving a Washington perspective, Pamela Olson, a former assistant secretary for tax policy at the Department of Treasury and a partner at law firm Skadden, Arps, Slate, Meagher & Flom LLP, said the recent extension of the dividend and capital gains tax cuts to 2010 means that during the next decade, Congress will be forced to deal with the sunset of massive tax cuts, the expanding reach of the alternative minimum tax, or AMT, and rising deficits as baby boomers hit retirement age and Social Security and Medicare spending increases. Those events are likely to compel a sweeping look at the tax system, she said. As changes to the tax system are debated, economists will be making the case for a tax system that is neutral-for example, one that taxes all investments alike because nonneutral taxes distort decisions in ways harmful to the economy. Differences in the tax treatment of debt and equity distort decisions about whether to finance with debt or equity. The differing treatment of capital gains and dividend income before the dividend tax cut distorted decisions about whether to pay dividends or retain earnings. The economists will be arguing persuasively for a neutral system and the elimination of the distortions, Olson said.

Bruce W. Fraser, a freelance financial write in New York, has written for  CNBC. Com, Wealth.com, Forbes.com, Mutual Funds magazine, Individual Investor, and many inflight publications. He can be reached at [email protected]. Visit him at www.bwfraser.com/home.

A 50-Year Bond?     
Don't laugh. It's possible. The British and French have introduced a 50-year bond. The Germans are still making up their minds. Similarly, the U.S. position at this time is that we will not introduce one.
But, says Quincy Krosby, chief investment strategist at The Hartford, all bets are off if the U.S. government imposes strict pension reform, as companies will need to match assets with liabilities. Also, as insurance companies sell more products designed to provide a lifetime stream of income, the need for yield on the long end of the yield curve increases. "The more buying we have in the Treasury market for whatever reason, the more yields go down. Again, with the increasing need to match assets and liabilities, the need will arise for the 50-year," Krosby said.